Republic of the Philippines | SUPREME COURT | Manila | THIRD DIVISION

G.R. No. 91332 | July 16, 1993

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF
TABAC REUNIES, S.A., petitioners
vs.
THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION, respondents.

Quasha, Asperilla, Ancheta, Pea & Nolasco Law Office for petitioners.
Teresita Gandionco-Oledan for private respondent.

MELO, J.:

In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada), Inc.,
and Fabriques of Tabac Reunies, S.A., are ascribing whimsical exercise of the faculty
conferred upon magistrates by Section 6, Rule 58 of the Revised Rules of Court when
respondent Court of Appeals lifted the writ of preliminary injunction it earlier had issued
against Fortune Tobacco Corporation, herein private respondent, from manufacturing
and selling "MARK" cigarettes in the local market.

Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN", and
"LARK", also for cigarettes, must be protected against unauthorized appropriation,
petitioners twice solicited the ancillary writ in the course the main suit for infringement
but the court of origin was unpersuaded.

Before we proceed to the generative facts of the case at bar, it must be emphasized that
resolution of the issue on the propriety of lifting the writ of preliminary injunction should
not be construed as a prejudgment of the suit below. Aware of the fact that the discussion
we are about to enter into involves a mere interlocutory order, a discourse on the aspect
infringement must thus be avoided. With these caveat, we shall now shift our attention to
the events which spawned the controversy.

As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized
under the laws of the State of Virginia, United States of America, and does business at 100
Park Avenue, New York, New York, United States of America. The two other plaintiff
foreign corporations, which are wholly-owned subsidiaries of Philip Morris, Inc., are
similarly not doing business in the Philippines but are suing on an isolated transaction. As
registered owners "MARK VII", "MARK TEN", and "LARK" per certificates of registration
issued by the Philippine Patent Office on April 26, 1973, May 28, 1964, and March 25,
1964, plaintiffs-petitioners asserted that defendant Fortune Tobacco Corporation has no
right to manufacture and sell cigarettes bearing the allegedly identical or confusingly
similar trademark "MARK" in contravention of Section 22 of the Trademark Law, and
should, therefore, be precluded during the pendency of the case from performing the acts
complained of via a preliminary injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No.
13132).

For its part, Fortune Tobacco Corporation admitted petitioners' certificates of
registration with the Philippine Patent Office subject to the affirmative and special
defense on misjoinder of party plaintiffs.
Private respondent alleged further that it has been authorized by the Bureau of Internal
Revenue to manufacture and sell cigarettes bearing the trademark "MARK", and that
"MARK" is a common word which cannot be exclusively appropriated (p.158, Court of
Appeals Rollo in A.C.-G.R. SP No. 13132). On March 28, 1983, petitioners' prayer for
preliminary injunction was denied by the Presiding Judge of Branch 166 of the Regional
Trial Court of the National Capital Judicial Region stationed at Pasig, premised upon the
following propositions:

Plaintiffs admit in paragraph 2 of the complaint that ". . . they are not doing business in
the Philippines and are suing on an isolated transaction . . ." This simply means that they
are not engaged in the sale, manufacture, importation, exportation and advertisement of
their cigarette products in the Philippines. With this admission, defendant asks: ". . . how
could defendant's "MARK" cigarettes cause the former "irreparable damage" within the
territorial limits of the Philippines?" Plaintiffs maintain that since their trademarks are
entitled to protection by treaty obligation under Article 2 of the Paris Convention of
which the Philippines is a member and ratified by Resolution No. 69 of the Senate of the
Philippines and as such, have the force and effect of law under Section 12, Article XVII of
our Constitution and since this is an action for a violation or infringement of a trademark
or trade name by defendant, such mere allegation is sufficient even in the absence of
proof to support it. To the mind of the Court, precisely, this is the issue in the main case to
determine whether or not there has been an invasion of plaintiffs' right of property to
such trademark or trade name. This claim of plaintiffs is disputed by defendant in
paragraphs 6 and 7 of the Answer; hence, this cannot be made a basis for the issuance of a
writ of preliminary injunction.

There is no dispute that the First Plaintiff is the registered owner of trademark "MARK
VII" with Certificate of Registration No. 18723, dated April 26,1973 while the Second
Plaintiff is likewise the registered owner of trademark "MARK TEN" under Certificate of
Registration No. 11147, dated May 28, 1963 and the Third Plaintiff is a registrant of
trademark "LARK" as shown by Certificate of Registration No. 10953 dated March 23,
1964, in addition to a pending application for registration of trademark "MARK VII" filed
on November 21, 1980 under Application Serial No. 43243, all in the Philippine Patent
Office. In same the manner, defendant has a pending application for registration of the
trademark "LARK" cigarettes with the Philippine Patent Office under Application Serial
No. 44008. Defendant contends that since plaintiffs are "not doing business in the
Philippines" coupled the fact that the Director of Patents has not denied their pending
application for registration of its trademark "MARK", the grant of a writ of preliminary
injunction is premature. Plaintiffs contend that this act(s) of defendant is but a subterfuge
to give semblance of good faith intended to deceive the public and patronizers into
buying the products and create the impression that defendant's goods are identical with
or come from the same source as plaintiffs' products or that the defendant is a licensee of
plaintiffs when in truth and in fact the former is not.

But the fact remains that with its pending application, defendant has embarked in the
manufacturing, selling, distributing and advertising of "MARK" cigarettes. The question of
good faith or bad faith on the part of defendant are matters which are evidentiary in
character which have to be proven during the hearing on the merits; hence, until and
unless the Director of Patents has denied defendant's application, the Court is of the
opinion and so holds that issuance a writ of preliminary injunction would not lie.
There is no question that defendant has been authorized by the Bureau of Internal
Revenue to manufacture cigarettes bearing the trademark "MARK" (Letter of Ruben B.
Ancheta, Acting Commissioner addressed to Fortune Tobacco Corporation dated April 3,
1981, marked as Annex "A", defendant's "OPPOSITION, etc." dated September 24, 1982).
However, this authority is qualified . . . that the said brands have been accepted and
registered by the Patent Office not later than six (6) months after you have been
manufacturing the cigarettes and placed the same in the market." However, this grant ". . .
does not give you protection against any person or entity whose rights may be prejudiced
by infringement or unfair competition in relation to your indicated trademarks/brands".
As aforestated, the registration of defendant's application is still pending in the Philippine
Patent Office.

It has been repeatedly held in this jurisdiction as well as in the United States that the right
or title of the applicant for injunction remedy must be clear and free from doubt. Because
of the disastrous and painful effects of an injunction, Courts should be extremely careful,
cautious and conscionable in the exercise of its discretion consistent with justice, equity
and fair play.

There is no power the exercise of which is more delicate which requires greater caution,
deliberation, and sound discretion, or (which is) more dangerous in a doubtful case than
the issuing of an injunction; it is the strong arm of equity that never ought to be extended
unless to cases of great injury, where courts of law cannot afford an adequate or
commensurate remedy in damages. The right must be clear, the injury impending or
threatened, so as to be averted only by the protecting preventive process of injunction.
(Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1, 617, Baldw. 205, 217.)

Courts of equity constantly decline to lay down any rule which injunction shall be granted
or withheld. There is wisdom in this course, for it is impossible to foresee all exigencies of
society which may require their aid to protect rights and restrain wrongs. (Merced M. Go
v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.)

It is the strong arm of the court; and to render its operation begin and useful, it must be
exercised with great discretion, and when necessary requires it. (Attorney-General v.
Utica Inc. Co., P. John Ch. (N.Y.) 371.)

Having taken a panoramic view of the position[s] of both parties as viewed from their
pleadings, the picture reduced to its minimum size would be this: At the crossroads are
the two (2) contending parties, plaintiffs vigorously asserting the rights granted by law,
treaty and jurisprudence to restrain defendant in its activities of manufacturing, selling,
distributing and advertising its "MARK" cigarettes and now comes defendant who
countered and refused to be restrained claiming that it has been authorized temporarily
by the Bureau of Internal Revenue under certain conditions to do so as aforestated
coupled by its pending application for registration of trademark "MARK" in the Philippine
Patent Office. This circumstance in itself has created a dispute between the parties which
to the mind of the Court does not warrant the issuance of a writ of preliminary injunction.

It is well-settled principle that courts of equity will refuse an application for the
injunctive remedy where the principle of law on which the right to preliminary injunction
rests is disputed and will admit of doubt, without a decision of the court of law
establishing such principle although satisfied as to what is a correct conclusion of law
upon the facts. The fact, however, that there is no such dispute or conflict does not in
itself constitute a justifiable ground for the court to refuse an application for the
injunctive relief. (Hackensack Impr. Commn. v. New Jersey Midland P. Co., 22 N.J. Eg. 94.)

Hence, the status quo existing between the parties prior to the filing of this case should be
maintained. For after all, an injunction, without reference to the parties, should be
violent, vicious nor even vindictive. (pp. 338-341, Rollo in G.R. No. 91332.)

In the process of denying petitioners' subsequent motion for reconsideration of the order
denying issuance of the requested writ, the court of origin took cognizance of the
certification executed on January 30, 1984 by the Philippine Patent Office attesting to the
fact that private respondent's application for registration is still pending appropriate
action. Apart from this communication, what prompted the trial court judge to entertain
the idea of prematurity and untimeliness of petitioners' application for a writ of
preliminary injunction was the letter from the Bureau of Internal Revenue date February
2, 1984 which reads:

MRS. TERESITA GANDIONGCO OLEDAN
Legal Counsel
Fortune Tobacco Corporation

Madam:

In connection with your letter dated January 25, 1984, reiterating your query as to
whether your label approval automatically expires or becomes null and void after six (6)
months if the brand is not accepted and by the patent office, please be informed that no
provision in the Tax Code or revenue regulation that requires an applicant to comply with
the aforementioned condition order that his label approved will remain valid and
existing.

Based on the document you presented, it shows that registration of this particular label
still pending resolution by the Patent Office. These being so , you may therefore continue
with the production said brand of cigarette until this Office is officially notified that the
question of ownership of "MARK" brand is finally resolved.

Very truly yours,

TEODORO D. PAREO
Chief, Manufactured Tobacco
Tax Division
TAN-P6531-D2830-A-6

(p. 348, Rollo.)

It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark Division
of the then Philippine Patent Office that Fortune's application for its trademark is still
pending before said office (p. 311, Rollo).

Petitioners thereafter cited supervening events which supposedly transpired since March
28, 1983, when the trial court first declined issuing a writ of preliminary injunction, that
could alter the results of the case in that Fortune's application had been rejected, nay,
barred by the Philippine Patent Office, and that the application had been forfeited by
abandonment, but the trial court nonetheless denied the second motion for issuance of
the injunctive writ on April 22, 1987, thus:

For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-movants
have fallen far short of the legal requisites that would justify the grant of the writ of
preliminary injunction prayed for. For one, they did not even bother to establish by
competent evidence that the products supposedly affected adversely by defendant's
trademark now subject of an application for registration with the Philippine Patents
Office, are in actual use in the Philippines. For another, they concentrated their fire on the
alleged abandonment and forfeiture by defendant of said application for registration.

The Court cannot help but take note of the fact that in their complaint plaintiffs included a
prayer for issuance preliminary injunction. The petition was duly heard, and thereafter
matter was assiduously discussed lengthily and resolved against plaintiffs in a 15-page
Order issued by the undersigned's predecessor on March 28, 1983. Plaintiffs' motion for
reconsideration was denied in another well-argued 8 page Order issued on April 5, 1984,,
and the matter was made to rest.

However, on the strength of supposed changes in the material facts of this case, plaintiffs
came up with the present motion citing therein the said changes which are: that
defendant's application had been rejected and barred by the Philippine Patents Office,
and that said application has been deemed abandoned and forfeited. But defendant has
refiled the same.

Plaintiffs' arguments in support of the present motion appear to be a mere rehash of their
stand in the first above-mentioned petition which has already been ruled upon adversely
against them. Granting that the alleged changes in the material facts are sufficient
grounds for a motion seeking a favorable grant of what has already been denied, this
motion just the same cannot prosper.

In the first place there is no proof whatsoever that any of plaintiffs' products which they
seek to protect from any adverse effect of the trademark applied for by defendant, is in
actual use and available for commercial purposes anywhere in the Philippines. Secondly
as shown by plaintiffs' own evidence furnished by no less than the chief of Trademarks
Division of the Philippine Patent Office, Atty. Enrique Madarang, the abandonment of an
application is of no moment, for the same can always be refiled. He said there is no
specific provision in the rules prohibiting such refiling (TSN, November 21, 1986, pp. 60
& 64, Raviera). In fact, according to Madarang, the refiled application of defendant is now
pending before the Patents Office. Hence, it appears that the motion has no leg to stand
on. (pp. 350-351, Rollo in G. R. No. 91332.)

Confronted with this rebuff, petitioners filed a previous petition for certiorari before the
Court, docketed as G.R. No. 78141, but the petition was referred to the Court of Appeals.

The Court of Appeals initially issued a resolution which set aside the court of origin's
order dated April 22, 1987, and granted the issuance of a writ of preliminary injunction
enjoining Fortune, its agents, employees, and representatives, from manufacturing,
selling, and advertising "MARK" cigarettes. The late Justice Cacdac, speaking for the First
Division of the Court of Appeals in CA-G.R. SP No. 13132, remarked:

There is no dispute that petitioners are the registered owners of the trademarks for
cigarettes "MARK VII", "MARK TEN", and "LARK".(Annexes B, C and D, petition). As found
and reiterated by the Philippine Patent Office in two (2) official communications dated
April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the
trademarks of petitioners, hence registration was barred under Sec. 4 (d) of Rep. Act. No.
166, as amended (pp. 106, 139, SCA rollo). In a third official communication dated April 8,
1986, the trademark application of private respondent for the "MARK" under Serial No.
44008 filed on February 13, 1981 which was declared abandoned as of February 16,
1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the
Revised Rules of Practitioners in Trademark Cases." (p. 107, CA rollo). The foregoing
documents or communications mentioned by petitioners as "the changes in material facts
which occurred after March 28, 1983", are not also questioned by respondents.

Pitted against the petitioners' documentary evidence, respondents pointed to (1) the
letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting
Commissioner of Internal Revenue, temporarily granting the request of private
respondent for a permit to manufacture two (2) new brands of cigarettes one of which is
brand "MARK" filter-type blend, and (2) the certification dated September 26, 1986 of
Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued upon the written request of
private respondents' counsel dated September 17, 1986 attesting that the records of his
office would show that the "trademark MARK" for cigarettes is now the subject of a
pending application under Serial No. 59872 filed on September 16, 1986.

Private respondent's documentary evidence provides the reasons neutralizing or
weakening their probative values. The penultimate paragraph of Commissioner Diaz'
letter of authority reads:

Please be informed further that the authority herein granted does not give you protection
against any person or entity whose rights may be prejudiced by infringement or unfair
competition in relation to your above-named brands/trademark.

While Director Sandico's certification contained similar conditions as follows:

This Certification, however, does not give protection as against any person or entity
whose right may be prejudiced by infringement or unfair competition in relation to the
aforesaid trademark nor the right to register if contrary to the provisions of the
Trademark Law, Rep. Act No. 166 as amended and the Revised Rules of Practice in
Trademark Cases.

The temporary permit to manufacture under the trademark "MARK" for cigarettes and
the acceptance of the second application filed by private respondent in the height of their
dispute in the main case were evidently made subject to the outcome of the said main
case or Civil Case No. 47374 of the respondent Court.
Thus, the Court has not missed to note the absence of a mention in the Sandico letter of
September 26, 1986 of any reference to the pendency of the instant action filed on August
18, 1982. We believe and hold that petitioners have shown a prima facie case for the
issuance of the writ of prohibitory injunction for the purposes stated in their complaint
and subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle Co. vs.
Quintillan, 125 SCRA 276)

The requisites for the granting of preliminary injunction are the existence of the right
protected and the facts against which the injunction is to be directed as violative of said
right. (Buayan Cattle Co. vs. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a
writ framed according to the circumstances of the case commanding an act which the
Court regards as essential to justice and restraining an act it deems contrary to equity
and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant
may, before final judgment, do or continue the doing of the act which the plaintiff asks the
court to restrain, and thus make ineffectual the final judgment rendered afterwards
granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445).

Generally, its grant or denial rests upon the sound discretion of the Court except on a
clear case of abuse (Belish Investment & Finance Co. vs. State House, 151 SCRA 636).
Petitioners' right of exclusivity to their registered trademarks being clear and beyond
question, the respondent court's denial of the prohibitive writ constituted excess of
jurisdiction and grave abuse discretion. If the lower court does not grant preliminary
injunction, the appellate court may grant the same. (Service Specialists, Inc. vs. Sheriff of
Manila, 145 SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.)

After private respondent Fortune's motion for reconsideration was rejected, a motion to
dissolve the disputed writ of preliminary injunction with offer to post a counterbond was
submitted which was favorably acted upon by the Court of Appeals, premised on the
filing of a sufficient counterbond to answer for whatever perjuicio petitioners may suffer
as a result thereof, to wit:

The private respondent seeks to dissolve the preliminary injunction previously granted
by this Court with an offer to file a counterbond. It was pointed out in its supplemental
motion that lots of workers employed will be laid off as a consequence of the injunction
and that the government will stand to lose the amount of specific taxes being paid by the
private respondent. The specific taxes being paid is the sum total of P120,120, 295.98
from January to July 1989.

The petitioners argued in their comment that the damages caused by the infringement of
their trademark as well as the goodwill it generates are incapable of pecuniary estimation
and monetary evaluation and not even the counterbond could adequately compensate for
the damages it will incur as a result of the dissolution of the bond. In addition, the
petitioner further argued that doing business in the Philippines is not relevant as the
injunction pertains to an infringement of a trademark right.

After a thorough re-examination of the issues involved and the arguments advanced by
both parties in the offer to file a counterbond and the opposition thereto, WE believe that
there are sound and cogent reasons for US to grant the dissolution of the writ of
preliminary injunction by the offer of the private respondent to put up a counterbond to
answer for whatever damages the petitioner may suffer as a consequence of the
dissolution of the preliminary injunction.

The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of
the lifting of the preliminary injunction considering that they are not actually engaged in
the manufacture of the cigarettes with the trademark in question and the filing of the
counterbond will amply answer for such damages.

While the rule is that an offer of a counterbond does not operate to dissolve an injunction
previously granted, nevertheless, it is equally true that an injunction could be dissolved
only upon good and valid grounds subject to the sound discretion of the court. As WE
have maintained the view that there are sound and good reasons to lift the preliminary
injunction, the motion to file a counterbond is granted. (pp. 53-54, Rollo in G.R. No.
91332.)

Petitioners, in turn, filed their own motion for re-examination geared towards
reimposition of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R. No.
91332).

Hence, the instant petition casting three aspersions that respondent court gravely abused
its discretion tantamount to excess of jurisdiction when:

I. It required, contrary to law and jurisprudence, that in order that petitioners
may suffer irreparable injury due to the lifting of the injunction, petitioners
should be using actually their registered trademarks in commerce in the
Philippines;

II. It lifted the injunction in violation of section 6 of Rule 58 of the Rules of Court;
and

III. After having found that the trial court had committed grave abuse of discretion
and exceeded its jurisdiction for having refused to issue the writ of injunction
to restrain private respondent's acts that are contrary to equity and good
conscience, it made a complete about face for legally insufficient grounds and
authorized the private respondent to continue performing the very same acts
that it had considered contrary to equity and good conscience, thereby
ignoring not only the mandates of the Trademark Law, the international
commitments of the Philippines, the judicial admission of private respondent
that it will have no more right to use the trademark "MARK" after the Director
of Patents shall have rejected the application to register it, and the
admonitions of the Supreme Court. (pp. 24-25, Petition; pp. 25-26, Rollo.)

To sustain a successful prosecution of their suit for infringement, petitioners, as foreign
corporations not engaged in local commerce, rely on section 21-A of the Trademark Law
reading as follows:



Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has
been registered or assigned under this act may bring an action hereunder for
infringement, for unfair competition, or false designation of origin and false description,
whether or not it has been licensed to do business in the Philippines under Act Numbered
Fourteen hundred and fifty-nine, as amended, otherwise known as the Corporation Law,
at the time it brings complaint: Provided, That the country of which the said foreign
corporation or juristic person is a citizen or in which it is domiciled, by treaty, convention
or law, grants a similar privilege to corporate or juristic persons of the Philippines. (As
inserted by Sec. 7 of Republic Act No. 638.)

To drive home the point that they are not precluded from initiating a cause of action in
the Philippines on account of the principal perception that another entity is pirating their
symbol without any lawful authority to do so. Judging from a perusal of the aforequoted
Section 21-A, the conclusion reached by petitioners is certainly correct for the
proposition in support thereof is embedded in the Philippine legal jurisprudence.

Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA
50 [1971]) by then Justice (later Chief Justice) Makalintal that:

Parenthetically, it may be stated that the ruling in the Mentholatum case was
subsequently derogated when Congress, purposely to "counteract the effects" of said
case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark Law, which
allows a foreign corporation or juristic person to bring an action in Philippine courts for
infringement of a mark or tradename, for unfair competition, or false designation of
origin and false description, "whether or not it has been licensed to do business in the
Philippines under Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise
known as the Corporation Law, at the time it brings complaint."

Petitioner argues that Section 21-A militates against respondent's capacity to maintain a
suit for cancellation, since it requires, before a foreign corporation may bring an action,
that its trademark or tradename has been registered under the Trademark Law. The
argument misses the essential point in the said provision, which is that the foreign
corporation is allowed thereunder to sue "whether or not it has been licensed to do
business in the Philippines" pursuant to the Corporation Law (precisely to counteract the
effects of the decision in the Mentholatum case). (at p. 57.)

However, on May, 21, 1984, Section 21-A, the provision under consideration, was
qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]),
to the effect that a foreign corporation not doing business in the Philippines may have the
right to sue before Philippine Courts, but existing adjective axioms require that qualifying
circumstances necessary for the assertion of such right should first be affirmatively
pleaded (2 Agbayani Commercial Laws of the Philippines, 1991 Ed., p. 598; 4 Martin,
Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a
foreign corporation suing under Section 21-A to simply allege its alien origin. Rather, it
must additionally allege its personality to sue. Relative to this condition precedent, it may
be observed that petitioners were not remiss in averring their personality to lodge a
complaint for infringement (p. 75, Rollo in AC-G.R. SP No. 13132) especially so when they
asserted that the main action for infringement is anchored on an isolated transaction (p.
75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc.,
17 SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p.
103).

Another point which petitioners considered to be of significant interest, and which they
desire to impress upon us is the protection they enjoy under the Paris Convention of
1965 to which the Philippines is a signatory. Yet, insofar as this discourse is concerned,
there is no necessity to treat the matter with an extensive response because adherence of
the Philippines to the 1965 international covenant due to pact sunt servanda had been
acknowledged in La Chemise (supra at page 390).

Given these confluence of existing laws amidst the cases involving trademarks, there can
be no disagreement to the guiding principle in commercial law that foreign corporations
not engaged in business in the Philippines may maintain a cause of action for
infringement primarily because of Section 21-A of the Trademark Law when the legal
standing to sue is alleged, which petitioners have done in the case at hand.

In assailing the justification arrived at by respondent court when it recalled the writ of
preliminary injunction, petitioners are of the impression that actual use of their
trademarks in Philippine commercial dealings is not an indispensable element under
Article 2 of the Paris Convention in that:

(2) . . . no condition as to the possession of a domicile or establishment in the
country where protection is claimed may be required of persons entitled to the benefits
of the Union for the enjoyment of any industrial property of any industrial property
rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)

Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A of
the Trademark Law which speaks loudly, about necessity of actual commercial use of the
trademark in the local forum:

Sec. 2. What are registrable. Trademarks, tradenames and service marks owned by
persons, corporations, partnerships or associations domiciled in the Philippines and by
persons, corporations, partnerships or associations domiciled in any foreign country may
be registered in accordance with the provisions of this Act; Provided, That said
trademarks, tradenames, or service marks are actually in use in commerce and services
not less than two months in the Philippines before the time the applications for
registration are filed; And provided, further, That the country of which the applicant for
registration is a citizen grants by law substantially similar privileges to citizens of the
Philippines, and such fact is officially certified, with a certified true copy of the foreign
law translated into the English language, by the government of the foreign country to the
Government of the Republic of the Philippines. (As amended by R.A. No. 865).

Sec. 2-A. Ownership of trademarks, tradenames and service marks; how acquired.
Anyone who lawfully produces or deals in merchandise of any kind or who engages in
any lawful business, or who renders any lawful service in commerce, by actual use
thereof in manufacture or trade, in business, and in the service rendered, may
appropriate to his exclusive use a trademark, a tradename, or a service mark not so
appropriated by another, to distinguish his merchandise, business or service from the
merchandise, business or service of others.
The ownership or possession of a trademark, tradename, service mark, heretofore or
hereafter appropriated, as in this section provided, shall be recognized and protected in
the same manner and to the same extent as are other property rights known to the law.
(As amended by R.A. No. 638). (Kabushi Kaisha Isetan vs. Intermediate Appellate Court,
203 SCRA 583 [1991], at pp. 589-590; emphasis supplied.)

Following universal acquiescence and comity, our municipal law on trademarks
regarding the requirement of actual use in the Philippines must subordinate an
international agreement inasmuch as the apparent clash is being decided by a municipal
tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8
Sessions 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal,
the fact that international law has been made part of the law of the land does not by any
means imply the primacy of international law over national law in the municipal sphere.
Under the doctrine of incorporation as applied in most countries, rules of international
law are given a standing equal, not superior, to national legislative enactments (Salonga
and Yap, Public International Law, Fourth ed., 1974, p. 16).

The aforequoted basic provisions of our Trademark Law, according to Justice Gutierrez,
Jr., in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]),
have been construed in this manner:

A fundamental principle of Philippine Trademark Law is that actual use in commerce in
the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a
tradename.

xxx xxx xxx

These provisions have been interpreted in Sterling Products International, Inc. v.
Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way:

A rule widely accepted and firmly entrenched because it has come down through the
years is that actual use in commerce or business is a prerequisite to the acquisition of the
right of ownership over a trademark.

xxx xxx xxx

. . . Adoption alone of a trademark would not give exclusive right thereto. Such right
grows out of their actual use. Adoption is not use. One may make advertisements, issue
circulars, give out price lists on certain goods; but these alone would not give exclusive
right of use. For trademark is a creation of use. The underlying reason for all these is that
purchasers have come to understand the mark as indicating the origin of the wares.
Flowing from this is the trader's right to protection in the trade he has built up and the
goodwill he has accumulated from use of the trademark. . . .

In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in
commerce.

We ruled in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]):

3. The Trademark law is very clear. It requires actual commercial use of the mark
prior to its registration. There is no dispute that respondent corporation was the first
registrant, yet it failed to fully substantiate its claim that it used in trade or business in
the Philippines the subject mark; it did not present proof to invest it with exclusive,
continuous adoption of the trademark which should consist among others, of
considerable sales since its first use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by
respondent which were dated way back in 1957 show that the zippers sent to the
Philippines were to be used as "samples" and "of no commercial value". The evidence for
respondent must be clear, definite and free from inconsistencies. (Sy Ching v. Gaw Lui, 44
SCRA 148-149) "Samples" are not for sale and therefore, the fact of exporting them to the
Philippines cannot be considered to be equivalent to the "use" contemplated by the law.
Respondent did not expect income from such "samples". There were no receipts to
establish sale, and no proof were presented to show that they were subsequently sold in
the Philippines. (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982];
Emphasis Supplied)

The records show that the petitioner has never conducted any business in the
Philippines. It has never promoted its tradename or trademark in the Philippines. It is
unknown to Filipino except the very few who may have noticed it while travelling abroad.
It has never paid a single centavo of tax to the Philippine government. Under the law, it
has no right to the remedy it seeks. (at pp. 589-591.)

In other words, petitioners may have the capacity to sue for infringement irrespective of
lack of business activity in the Philippines on account of Section 21-A of the Trademark
Law but the question whether they have an exclusive right over their symbol as to justify
issuance of the controversial writ will depend on actual use of their trademarks in the
Philippines in line with Sections 2 and 2-A of the same law.

It is thus incongruous for petitioners to claim that when a foreign corporation not
licensed to do business in Philippines files a complaint for infringement, the entity need
not be actually using its trademark in commerce in the Philippines. Such a foreign
corporation may have the personality to file a suit for infringement but it may not
necessarily be entitled to protection due to absence of actual use of the emblem in the
local market.

Going back to the first assigned error, we cannot help but notice the manner the
ascription was framed which carries with it the implied but unwarranted assumption of
the existence of petitioners' right to relief. It must be emphasized that this aspect of
exclusive dominion to the trademarks, together with the corollary allegation of
irreparable injury, has yet to be established by petitioners by the requisite quantum of
evidence in civil cases. It cannot be denied that our reluctance to issue a writ of
preliminary injunction is due to judicial deference to the lower courts, involved as there
is mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]).

In point of adjective law, the petition has its roots on a remedial measure which is but
ancillary to the main action for infringement still pending factual determination before
the court of origin. It is virtually needless to stress the obvious reality that critical facts in
an infringement case are not before us more so when even Justice Feliciano's opinion
observes that "the evidence is scanty" and that petitioners "have yet to submit copies or
photographs of their registered marks as used in cigarettes" while private respondent has
not, for its part, "submitted the actual labels or packaging materials used in selling its
"Mark" cigarettes." Petitioners therefore, may not be permitted to presume a given state
of facts on their so called right to the trademarks which could be subjected to irreparable
injury and in the process, suggest the fact of infringement. Such a ploy would practically
place the cart ahead of the horse. To our mind, what appears to be the insurmountable
barrier to petitioners' portrayal of whimsical exercise of discretion by the Court of
Appeals is the well-taken remark of said court that:

The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a consequence
of the lifting of the preliminary injunction considering that they are not actually engaged
in the manufacture of the cigarettes with the trademark in question and the filing of the
counterbond will amply answer for such damages. (p. 54. Rollo in G.R. No. 91332.)

More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R. No.
91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No. 91332)
indicating that they are not doing business in the Philippines, for these frank
representations are inconsistent and incongruent with any pretense of a right which can
breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58, Revised
Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show that
there exists a right to be protected and that the facts against which injunction is directed
are violative of said right (Searth Commodities Corporation vs. Court of Appeals, 207
SCRA 622 [1992]).

It may be added in this connection that albeit petitioners are holders of certificate of
registration in the Philippines of their symbols as admitted by private respondent, the
fact of exclusive ownership cannot be made to rest solely on these documents since
dominion over trademarks is not acquired by the mere fact of registration alone and does
not perfect a trademark right (Unno Commercial Enterprises, Inc. vs. General Milling
Corporation, 120 SCRA 804 [1983]).

Even if we disregard the candid statements of petitioners anent the absence of business
activity here and rely on the remaining statements of the complaint below, still, when
these averments are juxtaposed with the denials and propositions of the answer
submitted by private respondent, the supposed right of petitioners to the symbol have
thereby been controverted. This is not to say, however, that the manner the complaint
was traversed by the answer is sufficient to tilt the scales of justice in favor of private
respondent. Far from it.

What we are simply conveying is another basic tenet in remedial law that before
injunctive relief may properly issue, complainant's right or title must be undisputed and
demonstrated on the strength of one's own title to such a degree as to unquestionably
exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence,
inasmuch as the possibility of irreparable damage, without prior proof of transgression of
an actual existing right, is no ground for injunction being mere damnum absque injuria
(Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971];
Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p.
82).

On the economic repercussion of this case, we are extremely bothered by the thought of
having to participate in throwing into the streets Filipino workers engaged in the
manufacture and sale of private respondent's "MARK" cigarettes who might be
retrenched and forced to join the ranks of the many unemployed and unproductive as a
result of the issuance of a simple writ of preliminary injunction and this, during the
pendency of the case before the trial court, not to mention the diminution of tax revenues
represented to be close to a quarter million pesos annually. On the other hand, if the
status quo is maintained, there will be no damage that would be suffered by petitioners
inasmuch as they are not doing business in the Philippines.

With reference to the second and third issues raised by petitioners on the lifting of the
writ of preliminary injunction, it cannot be gainsaid that respondent court acted well
within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court:

Sec. 6. Grounds for objection to, or for motion of dissolution of injunction. The
injunction may be refused or, if granted ex parte, may be dissolved, upon the insufficiency
of the complaint as shown by the complaint itself, with or without notice to the adverse
party. It may also be refused or dissolved on other grounds upon affidavits on the part of
the defendants which may be opposed by the plaintiff also by affidavits. It may further be
refused or, if granted, may be dissolved, if it appears after hearing that although the
plaintiff is entitled to the injunction, the issuance or continuance thereof, as the case may
be, would cause great damage to the defendant while the plaintiff can be fully
compensated for such damages as he may suffer, and the defendant files a bond in an
amount fixed by the judge conditioned that he will pay all damages which the plaintiff
may suffer by the refusal or the dissolution of the injunction. If it appears that the extent
of the preliminary injunction granted is too great, it must be modified.

Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on
the following instances:

(1) If there is insufficiency of the complaint as shown by the allegations therein.
Refusal or dissolution may be granted in this case with or without notice to the
adverse party.

(2) If it appears after hearing that although the plaintiff is entitled to the
injunction, the issuance or continuance thereof would cause great damage to
the defendant, while the plaintiff can be fully compensated for such damages as
he may suffer. The defendant, in this case, must file a bond in an amount fixed
by the judge conditioned that he will pay all damages which plaintiff may suffer
by the refusal or the dissolution of the injunction.

(3) On the other grounds upon affidavits on the part of the defendant which may
be opposed by the plaintiff also affidavits.

Modification of the injunction may also be ordered by the court if it appears that the
extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court, 1986
ed., p. 99; Francisco, supra, at p. 268.)

In view of the explicit representation of petitioners in the complaint that they are not
engaged in business in the Philippines, it inevitably follows that no conceivable damage
can be suffered by them not to mention the foremost consideration heretofore discussed
on the absence of their "right" to be protected. At any rate, and assuming in gratia
argumenti that respondent court erroneously lifted the writ it previously issued, the
same may be cured by appeal and not in the form of a petition for certiorari (Clark vs.
Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). Verily, and mindful of the rule
that a writ of preliminary injunction is an interlocutory order which is always under the
control of the court before final judgment, petitioners' criticism must fall flat on the
ground, so to speak, more so when extinction of the previously issued writ can even be
made without previous notice to the adverse party and without a hearing (Caluya vs.
Ramos, 79 Phil. 640 [1974]; 3 Moran, Rules of Court, 1970 ed., p. 81).

WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of
Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED.

SO ORDERED.

Footnotes

01 Then presided over by Judge Pastor P. Reyes.
02 Court of Appeals Decision, Rollo, p. 137.
03 Rollo, p. 339.
04 Id., p. 73.
05 Id., p. 88.
06 With the concurrence of Nocon and G.C. Paras, JJ.
07 Rollo, p. 165.
08 Note 3.
09 Rollo, pp. 166-167.
10 Rollo, pp. 53-54.
11 Id. pp. 25-26.
12 154 SCRA 723 (1987).
13 154 SCRA at 728-729.
14 Certification, dated 8 August 1986, Annex "I" of the Petition, Rollo, p. 74.

15 Certification dated 30 January 1984, issued by Cesar C. San Diego, Director of Patents, certifying that as of
that date, private respondent's "Application Serial No. 44008 for the registration of trademark "MARK"
and design filed on 13 February 1981 was still pending appropriate action." (Rollo, p.).

16 This certification is quoted in the order dated 5 April 1984 of Judge Reyes; Rollo, p. 348.

17 Section 4 (d) of R.A. No. 166, as amended, specifies the kinds of trademarks, tradenames or service marks
which cannot be registered on the Principal Register:

(d) consists of or comprises a mark or tradename which so resembles mark or tradename
registered in the Philippines or a mark or tradename previously used in the Philippines by
another and not abandoned, as to be likely, when applied to or used in connection with the
goods or services of the applicant to cause confusion or mistake or to deceive purchasers; ...

18 The Paris Convention was concurred in by the Senate by S.R. No. 69, May 10, 1965 and the Instrument of
Ratification was signed by the President on October 11, 1965; List of Treaties and Other International
Agreements of the Republic of the Philippines, p. 1 (1966; U.P. Law Center). The adhesion of the
Philippines to the Convention became effective as of 27 September 1965; Canada on 12 June 1925;
Switzerland on 7 July 1884; and the United States on 30 May 1887.

The text of the Paris Convention and of the List of "Members-States of the International Union for the
Protection of Industrial Property (Paris Union) as in April 1968" may be found in G.H.C. Bodenhausen,
Guide to the Application of the Paris Convention for the Protection of Industrial Property (1968).

19 G.H.C. Bodenhausen, supra, p. 27.
20 51 Phil., 115 (1927).
21 51 Phil., at.
22 1 SCRA 1 (1961).
23 41 SCRA 50 (1971).
24 41 SCRA at.
25 147 SCRA 154 (1987).
26 147 SCRA at 162.
27 129 SCRA 373 (1984).
28 181 SCRA 410 (1990).
29 158 SCRA 233 (1988).

30 Such an attack was apparently made in Pag-Asa Industrial Corporation v. Court of Appeals, 118 SCRA
526(1982) which the majority opinion cites.

31 Accordingly, the importer or distributor does not acquire ownership of the trademark on the goods
imported or distributed; e.g., Gabriel v. Perez, 55 SCRA 406 (1974); Unno Commercial Enterprises v.
General Milling Corporation, 120 SCRA 804 (1983); Marvex Commercial Co., Inc. v. Petra Hawpia and Co.,
18 SCRA 1178 (1966); Operators, Inc. v. Director of Patents, 15 SCRA 147 (1965).

32 See generally, Western Equipment and Supply Co. v. Reyes, 51 SCRA 115 (1927); Asari Yoko Co. v. Kee
Boc, 1 S 1 a(1961); General Garments v. Director of Patents, 41 SCRA 50 (1971); La Chemise Lacoste, S.A.
v. Fernandez, 129 SCRA 373 (1984); Converse Rubber Corporation v. Universal Rubber Products, 147
SCRA 154 (1987).

33 Petitioners' Second Motion for Issuance of Preliminary Injunction, filed with the trial court; Rollo, p. 88.
See also the Petition for Certiorari filed with the Supreme Court, Rollo, p. 16.
34 See 2 Callman, Unfair Competition and Trade Marks (1945), p. 804. See also Grass, "Territorial Scope of
Trademark Rights," 44 U Miami L. Rev. 1075 (1990).
35 La Chemise Lacoste, 129 SCRA at 403.
36 See Schechter, "The Rational Basis of Trademark Protection," 40 Harv. L. Rev. 813 (1927); 2 Callman,
supra at 810.
37 2 Callman, supra at 811, citing Coca-Cola Company v. Brown, 60 T 2d 319.
38 See generally, 1 Nims, "Unfair Competition and Trademark, S. 35A (1947), p. 149.
39 See also 1 Nims, supra at 150.

40 See Hanover Star Milling Co. v. Metcalf, 240 U.S. 403 (1916); see also Territorial Scope of Trademark
Rights, supra at 1086.

In Hanover Star Milling Company v. Metcalf, the United States Supreme Court realized that advertising
had the potential for spreading business goodwill beyond the areas of actual market sales. The Court
alluded to the possibility that, in certain instances, the protection of trademarks could extend beyond the
zone of actual market penetration: "Into whatever markets the use of a trademark has extended, or its
meaning has become known, there will the manufacturer or trader whose trade is pirated by an
infringing use be entitled to protection and redress."

41 See 2 Callman, supra at 811.
42 74 Phil. 50 (1942).
43 24 SCRA 1018 (1968).

44 24 SCRA at 1025. In Faberge, Inc. v. Intermediate Appellate Court (G.R. No. 71189, 4 November 1992), a
Third Division Decision, the Court held that the use of the trademark "Brute" for men's briefs, was not an
infringement of the mark "Brut 33 and Device" for anti-perpirants, personal deodorant, shaving cream,
after shave-shower lotion, hair spray and hair shampoo. This case turned on interpretation of Section 20
R.A. No. 166 as amended, which appeared to limit the exclusive right of the senior user to the goods
specified in its Certificate of Registration. Faberge does not, as I read it, deny the existence of categories
or damage or injury in trademark cases which transcend the quantifiable loss of volume of commercial
sales. Moreover, the case at bar involves competing goods of one and the same class, i.e. cigarettes.

45 5 SCRA 126 (1962). See further Phil. Virginia Tobacco Adm. v. De los Angeles, 164 SCRA 543 (1988); Yu v.
Court of Appeals, G.R. No. 86683, 21 January 1993; Golding v. Balatbat, 36 Phil. 941 (1917); Liongson v.
Martinez, 36 Phil. 948 (1917).

46 5 SCRA at 130-131.
47 See Certification, dated 11 August 1989, issued by Mr. Melchor Banares, Assistant BIR Commissioner,
being Annex "A" to private respondent's "Supplemental Motion to Lift Writ of Preliminary Injunction with
Offer of Counterbond" filed with the Court of Appeals; Rollo p. 221.